When I was preparing for my final exam to earn my degree in International Relations, I had to study a course that covered a vast array of authors spanning all schools of thought, from classical liberalism and Wilsonian idealism to realism and various systemic and structuralist perspectives. It was a tough exam, so I decided to prepare strategically, understanding who the professor was and her views on the world order. My final would be oral, not written, so knowing that my professor had a more critical view of the system, I decided to focus my main topic on one of the most liberal authors I could find in the course syllabus. I thought this would make her first question, after my presentation, about an author completely opposed to what I had just presented, thus narrowing down the range of possibilities.
And indeed, at one point, while I was discussing my prepared topic, the professor cut me off abruptly and said, “That’s enough, clearly you know the topic you prepared, now talk to me about another author who is not so liberal, please.” Immediately, I began to talk about Kenneth Waltz, contrasting his position with that of Stephen M. Walt, and then connecting it with Robert Cox and his neo-Gramscian critical theory. It worked. I managed to finish my degree with a 10 on my final exam. What does this have to do with the content we have been discussing? Just as Steve Jobs said in his famous speech at Stanford University, “You can’t connect the dots looking forward; you can only connect them looking backward,” I now want to dedicate a few pages to the author I used to prepare for my final exam because, paradoxically, his ideas today help me develop part of this whole; therefore, without further ado, I present to you Richard Newton Rosecrance.
To begin with, this author argues that today, the desire to expand territorial controls is an obsolete wish. That can only be the dream of less developed countries that primarily produce and export goods obtained from the land. A call for Putin, who embarked not even on a war for resources but a purely ideological one, reinforcing the idea of human rights. It doesn’t matter what economic model a country decides to follow as long as there is a common agreement on human values.
In contrast, in developed economies, where capital, labor, and information are mobile resources, the desire to acquire territories is no longer there; instead, these countries focus their efforts on the global market. Here the author mentions two interesting wordplays: the Virtual State, which has reduced its production capacity, and the Virtual Corporation, referring to companies that have discovered the advantages of locating their production facilities where it is most profitable and not necessarily in the market where they intend to sell their products or services or where their headquarters are located. Google, Apple, Walmart, Amazon, Tesla, and Mercado Libre are examples of virtual corporations that today have become significant players at the international level, independent of the countries where they were born.
This was different from the case of the Trading State that strengthened after World War II when exports were the key to growth. Today, we understand that these are not the only way to achieve economic growth; it is also possible to produce outside our own borders and then allocate those products to the global market and then transfer the profits to the parent company.
This represents a significant shift in the conception of the State and redefines its actions on the international stage. The new State no longer controls its internal resources absolutely as in the mercantilist era; now, it negotiates with foreign and domestic capital and labor to attract them to its economic sphere and thus generate internal growth. This is why International Relations, through their diplomatic bodies, have become a key factor in the trade and foreign investments that countries receive, leaving aside, or at least reducing, the role of military strategies in the international context.
The Virtual State refers to a country whose economy is based on the mobile factors of production. Its strategy is to invest in people rather than accumulating expensive production capacity and subcontracting other functions to States that specialize in them. Singapore or Hong Kong, whose production facilities are now mainly located in southern China, could well be the model of a successful Virtual State in the new century.
The Virtual State specializes in modern technical and research services and derives its income not from high-value-added manufacturing but from producing designs and marketing services and financing. In this sense, in recent years, the price increase of international services has surpassed that of manufactured products. Meanwhile, land prices have continued to decline or, rather, grow slower than service prices. The size of its territory no longer determines a State’s economic potential. Virtual nations possess the competitive key to achieving the greatest well-being in the next century, according to Rosecrance.
Similarly, this author argues that anti-colonial revolutions have shown that nationalist mobilization in developing societies prevents the imperialist or invader from extracting resources, so a nation can direct its efforts to occupy new territories without obtaining economic benefits proportional to the resources invested. Land, a fixed factor, can be captured, but labor, capital, and information are mobile and, therefore, cannot be captured.
I grew up hearing that we were a country rich in natural resources, that having all four climates gave us a great advantage. However, while we were taught that in the past we were one of the world’s leading economic powers, today the country is poorer than ever. If we are so rich, where is that wealth? While it is debatable to say we are a rich country, what we can affirm is that we have been mismanaged. We are not rich. Wealth is created; if not, ask Singapore, which has no natural resources and is the second richest country in terms of per capita income[134], while Argentina 70 years ago was in the Top 10 of that ranking, with a population that was among the most prosperous in the world, while today we are not among the top 70 countries, and the population not only becomes poorer day by day, but a third[135] of the active workers receive incomes that place them below the poverty line, while in total, nearly 40% of the population[136] is submerged in it. Yes, one in three workers is poor. The narrative proposed not only failed, but it was also a lie. Data from the World Bank even indicates that Argentina ranks 47th among countries with the most natural wealth[137], neither first, nor second, nor third, nor in the Top 10[138]. These are data, not stories. What other explanation can we assume if not that we have been mismanaged? While the accumulated inflation between 1980 and 2022 in the United States was 142.8%, in the group of countries that today make up the European Union, it was 169.72%, while worldwide, it reached 238.92%. Argentina? 8,662.06%[139]. Meanwhile, all local political parties, from the return of democracy to the present, have strived to blame their political rivals for generating this inflation. Enough. The world is full of successful cases where inflation is not as severe a problem as it is here. If we could learn to add, subtract, multiply, divide, and solve equations in school, then we are also capable of understanding this economic factor without falling into petty arguments from one side or the other. Let’s not keep going in circles; otherwise, we will have a thousand pasts and no future.
[134] Ventura, L. (2022). Richest Countries in the World 2022. Global Finance Magazine. Viewed August 8, 2022, at https://www.gfmag.com/global-data/economic-data/richest-countries-in-the-world.
[135] Escobar, S. (2022). Poor with jobs: the threat facing Argentina’s middle class. Perfil. Viewed August 8, 2022, at https://www.perfil.com/noticias/economia/pobres-con-trabajo-la-amenaza-que-acecha-a-la-clase-media-argentina.phtml.
[136] Poverty – INDEC: Instituto Nacional de Estadística y Censos de la República Argentina. Indec.gob.ar. (2022). Viewed August 8, 2022, at https://www.indec.gob.ar/indec/web/Nivel3-Tema-4-46.
[137] End of the “world’s granary” myth: natural resources are not enough to save the external front. Ámbito. (2022). Viewed August 8, 2022, at https://www.ambito.com/economia/divisas/fin-al-mito-del-granero-del-mundo-los-recursos-naturales-no-alcanzan-salvar-el-frente-externo-n5219738.
[138] Craig, A. (2022). Which 10 Countries Have the Most Natural Resources? Investopedia. Viewed August 8, 2022, at https://www.investopedia.com/articles/markets-economy/090516/10-countries-most-natural-resources.asp.
[139] Cajén, F. (2022). Accumulated inflation between 1980 and 2021. Viewed August 15, 2022, at https://elestadovirtual.com/inflation.